Export Promotion Capital Goods (EPCG) Scheme: A Comprehensive Guide for Indian Exporters

Understanding the EPCG Scheme: An Overview

The Export Promotion Capital Goods (EPCG) Scheme is an export promotion scheme introduced by the Indian government to promote exports of capital goods. The scheme allows eligible exporters to import capital goods at a concessional rate of customs duty, subject to certain conditions. In this blog post, we will provide an overview of the EPCG Scheme, its objectives, benefits, eligibility criteria, and application procedure.

Objectives of the EPCG Scheme

The primary objective of the EPCG Scheme is to enhance the competitiveness of Indian exports by facilitating import of capital goods for production of goods and services. The scheme also aims to encourage technological upgradation and modernization of Indian industries, and to promote investment in the manufacturing sector.

Benefits of the EPCG Scheme

Under the EPCG Scheme, eligible exporters can import capital goods at a concessional rate of customs duty. The rate of customs duty is 3% for all sectors, except for certain specified sectors where the rate is 0%. The concessional rate of duty is available on both new and second-hand capital goods.

In addition, the EPCG Scheme allows for the import of spares, moulds, and dies for the imported capital goods at a concessional rate of customs duty, subject to certain conditions. The scheme also provides for the waiver of the Export Obligation (EO) in certain cases, such as when the capital goods are destroyed or become obsolete, or when the exporter has achieved a certain level of exports.

Eligibility Criteria for the EPCG Scheme

To be eligible for the EPCG Scheme, an exporter must meet the following criteria:

1. The exporter must be a manufacturer exporter or a merchant exporter tied to a supporting manufacturer.
2. The exporter must have a valid Import Export Code (IEC) issued by the Director General of Foreign Trade (DGFT).
3. The exporter must not be in the Negative List of Exporters or in the caution list of the Reserve Bank of India (RBI).
4. The exporter must have a minimum export turnover of Rs.1 crore in the preceding year.
5. The exporter must have a minimum remaining export obligation of 1.5 times the duty saved amount on capital goods imported under the scheme.

Application Procedure for the EPCG Scheme

To avail the benefits of the EPCG Scheme, an exporter must apply to the DGFT in the prescribed format along with the necessary documents, including a copy of the IEC, a copy of the export-import license, a copy of the project report, and a copy of the proforma invoice of the capital goods to be imported.

Once the application is processed and approved by the DGFT, the exporter will receive an Authorization Certificate (AC) specifying the duty saved amount and the export obligation to be fulfilled. The exporter can then proceed with the import of the capital goods and fulfill the export obligation within the prescribed time period.

In addition to the aforementioned benefits, the EPCG Scheme also enables Indian exporters to access modern and state-of-the-art capital goods at a reduced cost, which would otherwise be unaffordable. This helps them to improve their production processes and increase their competitiveness in the global market.

The scheme also helps in promoting the growth of small and medium enterprises (SMEs) in India by providing them with access to modern and technologically advanced machinery and equipment. This enables SMEs to enhance their production capabilities, increase their output, and expand their reach in the global market.

One of the key features of the EPCG Scheme is the provision for the waiver of Export Obligation (EO) in certain cases. This provides relief to exporters who are unable to meet their export obligations due to unforeseen circumstances such as natural calamities, economic downturns, or changes in the global market conditions. The waiver of EO also helps in preventing undue burden on the exporters, and encourages them to continue investing in their businesses.

However, it is important to note that the EPCG Scheme is subject to certain conditions and restrictions. The exporters are required to fulfill the prescribed Export Obligation (EO) within a specified time period, failing which they would be required to pay the full customs duty on the imported capital goods. The scheme is also subject to periodic reviews by the government, and the terms and conditions may be revised from time to time.

Conclusion

In conclusion, the EPCG Scheme is an important initiative by the Indian government to promote exports of capital goods, encourage technological upgradation and modernization of Indian industries, and promote investment in the manufacturing sector. The scheme provides several benefits to eligible exporters, including the concessional rate of customs duty on imported capital goods, the waiver of the Export Obligation in certain cases, and the import of spares, moulds, and dies at a concessional rate of customs duty. By leveraging the benefits of the EPCG Scheme, Indian exporters can enhance their competitiveness in the global market and contribute to the growth of the Indian economy.